When you picture a real estate investor there are a couple of images that immediately spring to mind: rich, old men furnished with generational wealth and clad in pinstriped suits. The image that springs to mind is sort of an unholy melange that lands somewhere in between the monopoly man and Donald Trump.
In reality, things couldn’t be more different. Whilst there are some mega investors who meet the stereotype to a T, step into the roles of real estate investors every day. Becoming a real estate investor is easier than ever before. If you’re wondering if you’d make a good real estate investor, check out this article on the qualities of great real estate investors. The appeal of investing in real estate is clear: people will always need a place to hang their hat, to call home. Housing will always be undeniably important, so the ubiquity of real estate makes it a worthwhile investment. In exchange for offering people a place to live, real estate investors are rewarded with predictable cash flow, assets that appreciate in value over time and equity that can be leveraged when you need it!
If you’re thinking about investing in real estate, you don’t have to be looking to build an empire. It can be as simple as supplementing your income or wanting to establish a nest egg for your family. Even if this is your first foray into the real estate world, you can still become a successful investor, all you need to do is develop an investment strategy, secure financing and then throw yourself into researching the market and the location you wish to invest in. To learn more about how much financing you can secure, read more here.
So once you’ve defined your investment strategy, you’ll want to start looking for an investment property. So as a new investor, what should you be on the lookout for?
What elements contribute to a profitable investment property? Here are some features you should look out for.
The neighbourhood you choose to invest in will have a huge impact on how profitable your investment will be. It will determine the types of tenants you’ll be able to attract and the rate of turnover you’re likely to see. For example, if you buy near a college you will likely be renting to students and see turn over every academic year. Conversely, if you buy in a good school district you will attract families that will likely want to stay in one spot over for the duration of their children’s schooling.
People will always be enticed to move to an area if that area offers great job opportunities. US investors can check out rates of job availabilities in their local areas with the U.S. Bureau of Labor Statistics (BLS). So if a major company moves to an area the profile of the neighbourhood will change and, depending on the company, this can cause rental prices to either rise or fall. Though always remember well-liked companies that will offer stable, well-paying jobs in your neighbourhood will help keep your property value high.
Before investing in property check out the local neighbourhood and investigate the local infrastructure! Take a walk around the neighbourhood and see if you could picture yourself living there. Check out the parks, cafes, theatres, public transport routes. Keep an eye out for planned future developments that have already been zoned or approved of in the area. While periods of ongoing construction could momentarily damage rental prices, the development will pay its dividends when new libraries, parks or educational institutions become a part of your local area.
Keep your eyes on the competition! Research real estate statistics in the area, if a neighbourhood has an unusually high number of listings you may want to steer clear as they could be an indication of a seasonal rental cycle or a declining neighbourhood. Plus, as any landlord knows, high-vacancy rates force landlords to lead lower rents and low-vacancy rates allows landlords to raise the price of rent – so take note of the average rental prices in the area. As a real estate investor, the income you make from rent is how you provide for yourself, so you’re going to want to make sure you’ll be able to comfortably cover mortgage payments, taxes, the expenses of maintaining the property and still have money left over to pay yourself a salary!
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Source: Information, Drawings and Images
All article information is sourced and available for review from referenced locations.
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